Ya know, I get it that the outcome for all of us if the EU can’t save itself could be horrific and investors need to be wary. What I don’t get is how irrational the market is from one day to the next. It requires so little to swing the DIJA 400-500 points. Today, Greece has a new PM and a new government is forming, and the Italians have made nice and are setting up a new government as well, one that will forcefully deal with Italy’s debt, or so they are saying now.
Shhh … Did you hear the whisper that U.S. “super-committee” is receiving pressure from some forty senators (Repubs and Dems) to include revenues as part of the package and to make the package big Don’t tell anyone. It’s a secret.
Today, I have so much economic fundamental news that is good, I want to share it all, but for the moment, I will stick to the plan and lay out the fourth reason to consider the market in a positive frame – the ten-year U.S. note is yielding 2.1%. It is simple, once the fear of Europe and the U.S. goes away, that low yield, and what it represents to all other bond holdings (save high-risk corporate or some muni bonds) means investors will seek a higher ROI, and the only place to get that is in the equities market. Currently, the spread between the 10-year rate and the earnings yield for the S&P 500 is just about 6%, double the traditional spread of 3%. How long do you think investors charged with making money for their clients will let this opportunity pass
Okay, so I am weak. I cannot resist my impulse to go where the going is good. Now that I have fessed up, I will indulge. Here is more economic good news, and this points to support for my four reasons thus far to see the market in a positive frame …
- Department store chain Kohl’s Corp raised its full-year profit forecast on Thursday and said it expects to continue its streak of sales gains during the holiday quarter. The company forecast that sales at its stores open at least a year would rise 2 percent to 4 percent in the current holiday quarter following a 2.1 percent rise in the third quarter
- New U.S. claims for unemployment benefits fell last week to their lowest since early April and the trade deficit unexpectedly shrank in September, the narrowest deficit since December thanks to record-high exports. This suggests the U.S. economy closed the third quarter a little stronger than many expected.
- China’s imports surged in October as exports grew at their slowest rate in months, suggesting efforts to tilt the economy toward domestic demand may be offsetting the external weakness that has dragged on economic growth this year.
Imagine that, a major department store chain is making money and it projects it will make a bunch more. Go figure, unemployment claims are dropping again, just as they were before the Japanese disaster last spring. Oh, and look at China’s soft, economic landing. Isn’t that pretty
Hey! Would ya look at the little four-legged creature with the darting eyes and pointed ears spinning in a circle
Trade in the day – Invest in your life …
